Originally Published by Janine (Roberts) Williams on HotelExecutive.com
Hotel Retail Simplified
Over the past decade, I have spoken with thousands of General Managers to analyze the retail efforts of their lobby retail outlet: the challenges they face, the approaches they take to increase their revenue, and what they wish they knew when it comes to managing a retail effort. The consensus that I have encountered is that most hotel managers have little to no retail background and find the market a daunting task to manage much less improve.
I have also worked with numerous brands, ownership groups, and management companies to help them overhaul their grab-and-go retail programs, and the overall consensus at the corporate level is: "We know there is an opportunity to increase revenue and guest satisfaction through our retail operations, but we don't know how to develop and sustain a profitable retail effort that our GMs can manage."
Often I find there is a tremendous disconnect between what the corporate level would like to see from their lobby retail programs and what the GM's are capable of doing given their lack of retail expertise and the limited time they have to invest in such a small portion of their operations. This article addresses issues both sides face in the hopes that, with some minor improvements, both sides can minimize the frustrations involved and maximize the profits that are easily achievable when a retail effort is managed successfully.
Challenge #1 - A Lack of Direction
The majority of national lobby retail programs have a well thought out program including what it should look like in the areas of fixtures, assortment, margins, preferred vendors, and merchandising.
Unfortunately, much of this direction is lost somewhere between the corporate conference room where it was planned, the management company who is tasked with sustaining the effort, and the General Manager who is running out to Costco to restock empty shelves before the next large group arrives.
The inability for the GM to adhere to standards can occur for a number of reasons. More often than not this occurs when the management company or franchisee is hesitant to get behind the standards set forth, or to create their own set of standards when there is a lack of direction from the brand.
I have spoken with several purchasing directors who say "We like to give the managers freedom of choice when it comes to the Pantry items, merchandising and vendors." And while this seems like a positive to empower managers at the property level, what actually occurs is frustration on the part of GMs who admittedly do not know what to sell, how to merchandise it, what to price it at, or how to get it consistently and conveniently without the trips off site.
The Impact to Your Retail Success
What results is an inconsistent appearance and offering, and a hit-or-miss guest experience from property to property depending on what each hotel was able to find locally from the sourcing options available to them. As well as frustrated GM's who know they aren't achieving a great retail offering, but don't have any direction to fix it either.
General Managers have expressed on numerous occasions that they wish they had more direction from their brand or management company on how to better maintain the retail offering. Because, unlike hospitality based decisions, where General Managers are confident making decisions and selecting the best vendor and products, retail is an area where they are often so unfamiliar that they long for a clear-cut How-To Manual to guide them.
I recently met with Remington Hospitality to discuss their Corner Pantry program. Amy McDaniel, Senior Vice President of Remington, sent me one of the most comprehensive retail program guides I have seen from a management company. Remington is clear on what they want the Pantry to be, what they don't want it to be, and what their guests will experience when they walk in to make a purchase. And while there are always improvements and adjustments that can be made to further increase revenue, there is no question that the GM's have clear guidelines on what any Corner Pantry anywhere in the US should offer.
So while it may seem like a positive, empowering move to allow properties to select assortments and procure products and fixtures by any means possible, it is far more effective to give clear standards on products, fixtures, and overall guest experience to create a consistent, manageable retail offering.
Challenge #2 - Finding a Reliable Supply Source
Most of the major brands - and some management companies - have a list of the basic categories and standard products that they are confident will sell best in the lobby shop while meeting the needs of their guests and the quality of the brand. But often, when speaking with the management companies who are tasked with monitoring the retail effort, I find that the ability to QA this portion of the hotels' standards is difficult for a variety of reasons. The chief reason being, it is difficult to get all hotels to order through one vendor that would make a national assortment standard possible.
In my position, I speak to at least 20 management companies per week, and they all seem to face the same issue when it comes to the supply side of the hotel pantry program. They have properties that are going all over town to get product - using as many as five different vendors plus a trip or two to the wholesale club. They truly think they are saving money by jumping through unbelievable hoops to supply a a 4'-6' wide corner of their lobby, when they are actually forfeiting time that could be used to book rooms - a much larger source of revenue.
The Impact to Retail Success
Managers are frustrated with the task of juggling five different sources: wholesale clubs, grocery stores, local distributors, broadliners, and other direct-store-delivery programs. Management companies are frustrated because each hotel winds up with a different assortment based on what they can procure from the sources available in their region. And everyone is frustrated because they are investing so much time into a retail operation that doesn't produce sufficient revenue to make it worth the time invested.
Rather than trying to find a handful of products through 5 different sources, seek out a national "hotel pantry distributor." There are national hotel pantry programs that fill all categories of a hotel pantry program including ice cream and frozen dinners and offer free nationwide delivery. The prices may be higher than going to Costco, but I find that the biggest loss of revenue is being out of stock on the best sellers or being unable to procure the items that WOULD BE best sellers, but they can't get the items through local delivery and wholesale clubs. This loss of revenue far outweighs the difference in the unit cost of a Snicker's bar.
The best hotel pantry programs offer a wide variety of products, online ordering, low minimums, and nationwide delivery. Managers will love the convenience and their revenue will increase because staying in stock becomes such an easy process. Management companies are encouraged to work with their chosen supplier to identify a best sellers list and generate a standard planogram for all hotels in their portfolio. With a planogram and consistent supply source, it is easier than ever to achieve that appearance and variety that will drive the revenue increases franchise groups and their managers are looking for.
There are also deals to be negotiated with major pantry suppliers for lowered pricing tiers and added incentives when an entire portfolio is being brought into the program. Be sure to ask about service agreements and any preferred pricing that would be available if all hotels in the portfolio were participating.
As a whole, the pantry program should be a simple to supply, simple to manage effort that adds thousands of dollars to your bottom line each month. The frustrations that GM's and Management Companies run into happen to every group that I work with. They are typically easy to resolve issues that are conquered with a clear plan, some core sales data, and the realization that the revenue opportunity that the Pantry presents is worth the upfront planning and effort. Take some time to sit down and outline a plan for your retail efforts in 2011.
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